By Rizal Ahmed, Chief Content Officer, SAPinsider
Customers are looking to simplify, integrate, and consolidate financial processes, and Central Finance is becoming a popular strategy for achieving that goal. But are you prepared for the integration implications?
SAPinsiders Consider Central Finance over the Short and Long Term
SAP Central Finance presents organizations with an opportunity to consolidate processes and data through a single instance of SAP S/4HANA. According the latest SAPinsider research, many companies are looking at this approach to address many of their current finance pain points, but also as a longer-term strategy.
44% of respondents in our recent Central Finance and Improving the Financial Close benchmark report, published in November 2020, indicated that they currently plan to leverage this approach help consolidate, centralize, and manage information. One third (33%) see Central Finance as a long-term solution.
Many see benefits in being able ease into their transition to SAP S/4HANA, but Central Finance is also a foundation for centralizing and simplifying finance for the years to come. To further understand these trends and how customers must prepare for this transition, SAPInsider sat down with Magnitude’s data integration experts – Doug Corpuel [Senior Director, SourceConnect], Parikshit Kumar [Director of Product Management], and John Hume [Solution Consulting Leader].
Even though SAP Central Finance is a way for organizations to pull data from multiple SAP and non-SAP ERP systems into a single place, interest in the solution is not just accelerating for very large enterprises with multiple instances. For them, the value of central finance is straightforward – centralize first with one instance before rolling out or having to convert all systems. But according to Magnitude the benefits also are appealing to smaller organizations as well. “We’re seeing more customers in the $10 Billion or below in revenue as well as the $5 billion and below start to embrace central finance. We are also seeing net new implementations coming from non-SAP landscapes,” reports Corpuel.
Why SAP Central Finance
Like their larger counterparts, smaller companies are dealing with similar complexities of larger organizations. “Smaller companies are also looking for better visibility across the enterprise. They have redundancies, and they need to consolidate and save money just like the big organizations and, particularly during this time, all companies want to consume innovation and new projects in bite size chunks” adds Corpuel.
Data Is at the Heart of Central Finance Integration
To reap the benefits of Central Finance, customers must first prepare for and address some of the key challenges that arise from linking multiple heterogenous finance applications and data sources to a central system. First and foremost is integration. Magnitude has a unique perspective on this challenge having designed and built SourceConnect, a solution aimed at solving the integration issues inherent with Central Finance projects. SourceConnect was recently added to SAP’s list of solution extensions.
According to Magnitude, companies thinking about the move to Central Finance must consider various layers of integration and data. “It all starts with master data. Understanding how various systems have defined elements such as cost centers, customers,etc. and having to map back where those definitions came from,” describes Hume.
As data moves from their source systems into Central Finance it must be harmonized. Organizations can do this manually applying their rules and processes, or they can leverage more automated and intelligent solutions such as SourceConnect. Many service organizations have also built their own tools to support this process.
The next layer organizations need to understand according to Magnitude is the transactional data. Integration is particularly challenging when it comes to integrating transactional data from non-SAP data sources. “For SAP-to-SAP level integration, SAP has this down and not much work is needed. However, when it comes to integrating non-SAP data that is where the complexities arise. There has to be a whole series of transformations, validations and error checking to move data into the Universal Journal,” describes Hume.
Tracking and Sychronizing Change
There are many nuances that extend beyond just the movement and preparation of data to come into a Central System, report our experts. In any Central Finance implementation the source systems remain operational, so there must be constant communication between applications. One of the pain points that Magnitude sees and seeks to solve is being able to not just see the data but drill down into the source-level detail “It’s not just about replicating ledgers and subledgers but being able to drill down into source AR and AP data,” says Hume.
The other key challenge is managing changes. As changes are made in either the central or source systems, companies need to make sure those changes are replicated and synchronized across the financial landscape. Bidirectional synchronization between Central Finance and source systems is something to prioritize as you consider or build your own integration solutions, report our experts.
“For example, if you are managing open items and you clear an unpaid item in one system, you need to make sure that it is also cleared in the central system so when you go and look at your report, you have an accurate picture in real time. That’s a feature that has been unique to our solution”: says Hume.
What Does This Mean for SAPinsiders?
Whether you have already started your Central Finance journey or are actively evaluating this option as part of your SAP S/4HANA journey here are some takeaways to guide your exploration:
- Fully explore Central Finance as an option. For many Central Finance can be a first step or a long-term strategy for solving system and process complexity and easing into their SAP S/4HANA journey. Fully understand this option and whether it is a fit for your organization. Talk to SAP, experts, and partners about their experience. Consume research, case studies, and other content from SAPinsider and others so that you can actively inform your decision makers and teams.
- Understand and assess the data implications of your project: There will be data and integration implications of any Central Finance project. The complexity of your integration challenge will depend on your landscape, source systems, data, and reporting priorities among other factors. Understand what it will take not just to move data back and forth, but to track changes and provide visibility into financial processes throughout your project and post go live.
- Actively evaluate tools to help automate and speed your Central Finance Project Without automation, the manual work to move data and establish the rules and integration necessary to support Central Finance can add months and potentially years to your project. Make sure you explore how tools and automation can be applied to solve your unique integration challenges and help get your project up and running quickly.
Magnitude provides enterprise solutions to help organizations transform data into insight and connect data and applications across diverse and distributed landscapes. Founded in 2014, Magnitude serves more than 1,300 global customers and has over 600 employees.